July 5, 2010

A Comfort of Consistency

Do you need an example of the reason that it's inadvisable for the ostensibly objective entity that regulates the marketplace to participate in its activities? Here's a small one:

Limits on the fees banks charge merchants who accept debit cards would not apply to government-issued cards, under a tentative House-Senate deal aimed at easing worries raised by state treasurers.

The agreement announced Monday softens a Senate provision in a broad financial regulation bill that requires the Federal Reserve to limit the amount banks collect from merchants for every debit card transaction.

We err in seeing the playing field as business versus government. Government is just another entity and it will naturally seek to draw power and authority toward itself. Here, it's giving itself advantages in the promulgation of a particular technology and service. Government cards may never expand, but as cards issued by private banks become more expensive for consumers, those issued by states and the feds will become more attractive candidates for future applications. In other words, if we see debit cards as a marketplace, government is moving to corner it.

Also evident in the above is that it will privilege those among the interests affected by its policies (i.e., state treasurers) who are most closely aligned and most easily controlled by its bureaucracy.